The effects of ownership on bank efficiency in Latin America

Abstract

In recent years many countries have privatised their state-owned banks and encouraged foreign investment. This article investigates the roles of state and private ownership and foreign and domestic ownership on the performance of banks across Latin America. Using a range of financial and economic ratios, data envelopment analysis (DEA) and regression modelling, the study reveals that by 2001 there was surprisingly little difference in performance between state-owned and privately-owned banks and between foreign and domestically-owned banks. The study also reports significantly different levels of bank performance in different Latin American countries, suggesting that country differences outweighed ownership differences in explaining performance.